xtbreak Testing for structural breaks in dynamic panel models

[Hein Willems]

Dear JanDitzen ,

I have read your papers on xtbreak and how to test for structural breaks in time series or panel data models. I am wondering however, are these tests suitable for dynamic panel data models as well?
If yes, I have another problem.

My utlimate goal is not to test on a structural break in one of the coefficients of the model but of a non-linear function of these coefficients, namely the long-run elasticities.
This elasticity is defined as the sum of the current and lagged coefficients divided by 1 minus the sum of the lagged coefficients on the dependent variable.

Do you have any advice on how to proceed?

Thanks in advance,

Hein Willems

[JanDitzen]

Hi Hein Willems ,
dynamic models introduce the complexity that the different break segments are dependent on each other. Therefore the theory is excluding dynamic models. You can of course add the lag of the dependent variable, but the critical values will be incorrect. The non linearity in your case makes the problem more complex. Is there a way to rewrite the model in a static form or so that the coefficient of interest is captured by a single variable.
Best,
Jan

[Hein Willems]

Dear JanDitzen ,

Thank you for your reply.
Unfortunately I do not see how I could rewrite the model in a static way. This is the model I am using:

xtdpdgmm L(0/2).consumption L(0/2).(gas gdp) heatdays, model(diff) gmm(consumption, lag(2 .)) gmm(gas, lag(1 .)) gmm(gdp, lag(1 .))  overid

For the non-linear coefficient, I think I could use a linear function for it as well. However, I do not see how to estimate a structural break in a valid way when I am still dealing with a dynamic model.

Thank in advance,

Hein Willems